One of the government-sponsored enterprises (GSE) has a loan purchase program (“aggregation” program) in which it buys whole loans, usually one at a time, from its multifamily/commercial loan correspondents. Each loan must meet the GSE’s underwriting guidelines. The correspondent represents to the GSE that the loan meets the guidelines and the GSE re-underwrites each loan for compliance with its guidelines. On behalf of a large insurance company, Boston Portfolio Advisors then re-underwrites each loan and inspects each property for compliance. The loans are placed into a special risk sharing pool in which the insurance company assumes the loan credit risk first loss exposure via a Mortgage Collateral Replacement Insurance policy. This cycle repeats on a monthly basis ongoing.
Boston Portfolio Advisor’s role is to manage the risk exposure, provide surveillance, direct workouts and other as necessary. BPA’s responsibilities in this project are as follows:
Product Development and Product Management
- Risk methodology
- Risk pricing methodology
- Risk pricing modeling
- Underwriting guidelines and parameters
Operating procedures (for all operations external to the insurance company)
- Development of operating procedures
- Documenting of operating procedures
- Implementation of operating procedures
Operations
- Management of loan portfolio operations
- Management of risk portfolio
- Supervision of counter-parties such as the GSE
- Verification of all premium calculations
Risk Selection / Due Diligence
- Loan re-underwriting
- Property inspections
- Seller and servicer evaluation
- Data accuracy audit
- Projection of default frequency, default timing, loss severity, and losses
- Exception handling
Deal Management
- Deal structuring
- Closing support
Post-Closing Surveillance
- Servicer surveillance and oversight
- Loan credit and property performance tracking
- Portfolio tracking and reporting
- Risk tracking and reporting
- Premium recalculation and reporting
Claims Support
- Loss mitigation
- Claims processing support
Special projects and analyses as requested by the insurance company
Note: Actual client names have been removed due to confidentiality issues.